When Credit Ratings Lose Their Meaning – BusinessWeek.

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Which is a safer investment: A Treasury bonds, backed by the full faith and credit of the U.S. government, or B securities backed by subprime loans, the same type of investments that led to the worst financial crisis since the Great Depression? For ratings company Standard & Poor’s, the answer is B.

S&P stripped the U.S. of its top grade, AAA, on Aug. 5, saying Washington politics was making the country less creditworthy. Meanwhile, the company has stamped AAA on more than $36 billion of U.S. securitized debt this year, according to data compiled by Bloomberg. Overall, some 14,000 securitized bonds, backed by everything from houses and malls to auto-dealer loans, carry the AAA rating from S&P. They are created by bankers who gather thousands of loans, package them into bonds, slice them into pieces of varying risk, and pay ratings firms a fee to evaluate them. S&P is not paid for rating U.S. government debt.

via When Credit Ratings Lose Their Meaning – BusinessWeek.

Strange Random Ratings Quote:

Facts are, insurance ratings are really dependent on the notion that some people are higher risk than others. – Patrick J. Kennedy

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Posted on September 8, 2011, in Article and tagged , , , , , , , . Bookmark the permalink. Leave a comment.

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